A failure by Greece to meet its International Monetary Fund obligations would definitely constitute a default to that institution, Canadian Finance Minister Joe Oliver said.
“It’s a default to the IMF clearly, and there are issues which can impact of course their domestic situation,” Oliver said in a Bloomberg interview on Wednesday as a meeting of the Group of Seven finance ministers and central bankers got under way in Dresden, Germany. “They could run out of money domestically.”
Greece is scheduled to pay around 300 million euros ($213 million) to the IMF at the end of next week. As time and money run out in the euro area’s most-indebted country, Greece is finding an agreement with its international creditors on unlocking further bailout aid elusive.
While Greece is not officially on the agenda of the G-7 meeting, it will be part of finance chiefs’ discussions, Oliver said. Greek officials are set to meet late Wednesday with representatives of the IMF and the European Commission in Brussels.
The issue is “how to deal with the short-term repayment schedule which is very lumpy and creates real issues for Greece — and then how we put Greece on a sustainable footing,” Oliver said.
Credit-rating companies treat the IMF differently from other creditors, meaning that failure to service official loans wouldn’t necessarily cause them to downgrade Greece to default.
Still, missing the June 5 payment to the fund could trigger a chain reaction that includes the European Central Bank raising the discount it applies to collateral that Greek banks post for emergency liquidity assistance.
A Greek default could create social and economic repercussions, worsening the “serially disappointing” economic output around the world from which Canada has also suffered, Oliver said.